Invisible Taxes

An idea came to me as I was reading about the great debate between the banks’ lobbyists and the retailers’ lobbyists. What a spectacle of two giant business lobbies fighting it out over who most has the consumers’ interests at heart! At least both sides say it’s all about you, the consumer.

The banks, with considerable help from Republicans in Congress, are trying to limit the re-regulation of the banks in the wake of the giant mortgage debacle. The specific issue that is getting all the attention at the moment is debit-card fees.

The way the banks collect this fee is ingenious: they take it from the stores where you shop and don’t let the stores show you how much it is. Since it’s only 2%, you hardly notice it. Just two cents on the dollar. But it adds up. The banks get $12 billion a year in profit. This must be what banks mean by innovation for consumers.

Naturally, paying with plastic for every little item you buy saves you the trouble of cashing checks, standing in line at the bank and so on. Your debit card doesn’t even feel like money. The system also discourages you from actually seeing how much you spend. But if you go over the limit and spend more than you have, the banks win the trifecta: penalties and overdraft fees on the order of $35 a pop.

The debit card system is basically the same as that for credit cards. Hidden fees paid by merchants, huge charges if you go over your max and usurious interest rates if you don’t pay everything off at once. (No wonder the Republicans have such irrational fears about strict Sharia law — they’re afraid of having their hands cut off.)

I am saying that without trying, the banks inadvertently constructed a perfect system of taxation. They rake in all this money that hardly anyone even notices, or complains about. Contrast this to the government’s collection of taxes. There’s hell to pay: People and politicians are outraged. Demagogues flourish.

But we can get rid of all this strife, and make use of the banks’ innovation. The debit and credit cards work a lot like a sales tax. The only difference is that the banks administer the cards, and the government, the sales tax. Perhaps the banks could take over sales taxes.

That’s not all.

Perhaps you’ve heard of the kooky libertarian notion that we would all rather have a 30-plus percent national sales tax instead of the income tax. They call it a “fair tax” because everyone would pay same thing. The SUV that costs $20,000 today, would cost more than $26,000, just like that. It’s a level field for you and the average billionaire. You all pay the same.

The “fair tax” would never have come up on my radar if not for a serious right-wing Republican candidate for president — the jovial, avuncular Mike Huckabee. He’s a convert. He says a “fair tax” would be the perfect system, in part because even hookers and drug dealers will pay.

But Huckabee and the fair taxers are lacking in imagination. They don’t realize the brilliance of their plan. The collection machinery for it is already in place from coast to coast: the banks can become the tax collectors. Who needs the IRS?

But seriously, people. You’ve all heard of privatization, the mantra of so many politicians from far right all the way to the barely left (only socialists oppose it). It’s a no brainer. After all, it’s obvious that business is far more efficient than government, isn’t it? And the banks already have this mechanism in place.

In conclusion, here’s my simple program:

Impose the necessary national sales tax, the “fair tax”.

Privatize the hated IRS and turn the job of collecting this new tax to the banks.

Eliminate all regulation on the banks so they can better innovate in order to handle our new taxes.

If it all works out, we can go even further, and get rid of more of the hated government by turning it over to the banks. They could handle social security just like the insurance companies handle health insurance.

There’s only one thing I haven’t quite worked out. Just suppose the banks fell into another rabbit hole like they did in the mortgage crisis two years ago that brought us to the brink of a depression. Now, just suppose the banks, which are too big to fail did something like that again. Who would they turn to for the bailout?

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Myself

I was a newspaperman for many years, last at the New York Times and before then at the Wall Street Journal. Something happened in the 1990s and I became fascinated with computers, went back to school and wound up with a PhD in computer science.